HOSPITALITY
Singapore tourism growing resilient on the back of structural transformation. While visitor arrivals dipped 13% yoy and 19% yoy during the AFC (1998) and SARS crisis (2003) respectively, the impact was relatively subdued at 4% yoy during the GFC in 2009. As Asian visitors accounted for the bulk 75% of total visitor arrivals, we believe Asian economies’ wealth effect on intra-regional travel was a significant contributing factor for this relative resilience. The successful opening of the two IRs and more unique attractions in the pipeline will further support visitor arrivals to Singapore.

Visitor arrivals to see a moderate 4% growth in 2012. Although we believe fundamentals of Singapore’s tourism industry remains intact with structural transformation and favourable demand-supply dynamics, macroeconomic headwinds could slow down visitor arrivals. We have lowered our visitor arrival forecast for 2012 from 7% to a modest 3.8% growth to 13.3m, based on a 10- year historical CAGR. We expect the hotel industry’s RevPAR to see a modest growth of 1.4% (previous 8%) in 2012 with average hotel occupancies in 2012 hovering around 84%.

For 2011, we maintain our 10% yoy growth forecast of 12.8m visitor arrivals. Visitor arrivals for 2011 are well on track to meet our expectations with 7M11 visitor arrivals surging 15% yoy to 7.6m. Tourism receipts for 1Q11 registered a 36% yoy growth to reach S$4.98b and are expected to surpass last year’s record of S$18.8b.

Serviced residences offer relative resilience among hospitality REITs. Among hospitality REITs, the serviced residence business is generally more resilient to external macro shocks and the seasonality in the hospitality industry due to its higher average length of stay, thus providing a stable source of income.

This was evident during the SARS (2003) and GFC (2009) when serviced residences' occupancy rates in Singapore remained relatively stable while hotel occupancy rates collapsed.

Limited incoming hotel room supply and serviced residences. As at end-2Q11, there were 39,517 hotel rooms in Singapore and this figure is expected to increase to 46,500 rooms by 2015 or increase by close to 1,500 rooms p.a. On serviced apartments, a total of about 1,200 rooms or an average of just about 300 rooms a year is expected to come on-stream over 2011-14.

Demand support from new attractions coming on-stream. Universal Studios Singapore will debut the world’s first Transformers theme-park ride in December. The ride will include state-of-the-art flight simulator systems, 3-D graphics and special effects and is likely to be a major crowd puller for Asian travellers. Other key attractions over the next few years include Gardens by the Bay, River Safari at Mandai and International Cruise Terminal.